Investor’s bitterness rose when his portfolio didn’t

Earned only $440 after a decade of contributions


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MONTREAL -- Any idea what the rate of return has been on your investments over the years?

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Hey there, time traveller!
This article was published 31/05/2009 (4867 days ago), so information in it may no longer be current.

MONTREAL — Any idea what the rate of return has been on your investments over the years?

It may come as a shock, and not in a good way.

Many investment companies still don’t post rates of return on their regular statements, and the monthly and quarterly totals can be misleading if you make regular contributions or withdrawals.

For Montrealer Bruce Harris (not his real name), the painful truth became obvious only after he sat down and tallied up what he had contributed to his RRSP, and compared it with current worth.

Over a 10-year period, he contributed $53,241, most of it in monthly instalments ranging from $100 to $240.

The total value after a decade was $53,681.

He had earned all of $440 for 10 years of saving, while the mutual-fund companies whose products he purchased collected thousands of dollars in management and redemption fees.

“I was really upset for a very long time,” Harris said. “I get the impression sometimes they don’t want you to know (how you’re doing). You see it going up and you don’t take into account the money you’re putting in. I could have done as well just leaving it in a bank account.”

Harris admits to being an aggressive investor, but didn’t try to manage his own affairs. He entrusted the money to financial advisers, of which he has had a half-dozen so far. They picked the investments.

“The first adviser left, and I got passed on to another, and so on,” he said. “I didn’t have a million, so you never felt anyone really cared about my little investment.”

Frustrated by the indifference, he instigated a switch two years ago to another adviser who called him out of the blue, just in time for the recent stock-market meltdown and an 18 per cent loss in 2008.

“I realize the recession is not their fault, but this is my last shot at the stock market,” he said. “I’m at a point in my life where I really have to be careful.”

Two advisers asked to take an independent look at Harris’s current portfolio gave it mixed reviews.

Martin Garneau of Majesta Financial Partners noted that it contained funds whose annual management fees would be lower if they had been purchased directly from the issuers rather than in a variation offered by the company now managing his money. The fixed-income content was significantly lower than the proportion indicated on the client statement, and the equity portion over-diversified in its Canadian content with five different funds, Garneau said.

Still, he cautioned against pulling out of the market entirely, because the investor “needs inflation-adjusted income for the next 30 years or more,” and with that kind of time frame, “being out of the stock market altogether seems extremely risky and potentially disastrous.”

Steven Wheeler of Freedom 55 Financial said recent performance of the chosen funds was average or better, but they came with above-average management expenses and back-end loads, meaning redemption fees if sold before a set period of time.

For someone nearing retirement who may need or want to access funds sooner than later, it’s not the ideal scenario, he said.

“I personally don’t like to sell back-ended fee-based investments. There isn’t anything you can do right now, but don’t compound your issues by putting new money into these types of investments.”

For Harris, the one consolation at this point is that he isn’t relying solely on financial investments for his future.

He has a company pension he’ll start collecting from his longtime employer when he retires at 55 this year. He also owns his home, worth more than triple what he paid 25 years ago.

So at least diversification into real estate and a company pension plan paid off.

Investing, however, has proved a major disappointment.

“I would do it again, but not as passively. I should have educated myself earlier, not relied on advisers,” he said. “I’m smarter now, but I’m 54.” And nowhere near freedom 55.

— Canwest News Service

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